Reasons to Tap your Pension Plan

    by Aditi Bansal

Updated on Montag, 19. Juni 2017

It is not a good idea to tap into your retirement plan early. Your pension savings or plans are intended for retirement. But, what if you need them now? There are some reasons why individuals commonly tap into their retirement plans even if it is not in their best interest.

tags  #Your Pension Plan  #Low Interest Debts #


Four bad Reasons why people tap into their retirement plan

Purchasing consumer goods

Tapping your retirement plan to buy end user products is one of the worst ideas. For instance, some individuals may draw their retirement plans to purchase home fittings, like new furniture and entertainment systems. Doing this, you are making the worst financial decision on your retirement plan.

Tapping into your retirement plan for reasons like this, you will have to pay a 10% first supply penalty. You will also have to pay revenue taxes on the funds that you took out. You should, therefore, use your regular savings to buy things like this, not your retirement plans.

Paying for low- interest debts

Most people tap into their retirement plans just to pay off their low-interest loans debts, for instance, student loans. However using your retirement plan to pay off commercial hard money loans or even a loan with a higher interest rate could be a good idea.  Paying off debts can be psychologically relieving; however, using your retirement plan to pay them off isn’t a good idea.

Buying a second home

Purchasing a primary home with your retirement plan is a good idea because you would meet the requirements for a hardship withdrawal and you won’t have to pay the early distribution price. However, using your retirement plan to buy a second one is a bad idea. You should only use your retirement plan for emergency uses only.

Investments that are questionable

Most of the time, an individual takes their pension funds to finance an investment opportunity. Unless you are guaranteed of the investment going to work out well, otherwise, you should just leave your retirement plan in your retirement account. There are a lot of grounds to make up for any venture especially the one that you are not sure if it will work. For instance, your investment opportunity will have to make up the 10% early distribution price and also the amount of income that you will have to pay before you can make any returns.

This page has a focus on Your Pension Plan, Low Interest Debts was shared by Aditi Bansal.

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